VEREIT Closes on Cole Sale to CIM

PHOENIX—VEREIT Inc. said Thursday afternoon it had closed on its sale of Cole Capital to an affiliate of CIM Group. The previously announced transaction enables VEREIT to simplify its business model and focus on its core real estate operating business.

For Los Angeles-based CIM, the transaction brings a retail distribution network serving independent broker-dealers and registered investment advisors into the fold, complementing CIM's existing relationships with institutional investors and wirehouse distribution channels. “CIM is acquiring expertise and taking over operations for what we believe are best-in-class performing real estate funds in the net-lease sector,” says Richard Ressler, CIM co-founder and principal. “We believe that adding net-lease assets is complementary to CIM's urban real asset platforms and will benefit all of our stakeholders.”

Under its new ownership, Cole has been renamed CCO Capital LLC. “Cole's distribution team, including sales, national accounts, shareholder relations, compliance, and marketing, have joined CIM, and CIM's entrepreneurial and collaborative culture will support the needs of our business,” says Bill Miller, CCO's president and CEO. “The structure and operations of the Cole REITs should continue without disruption.”

The CCO platform has more than $7.6 billion in assets under management. It manages five public non-listed REITs: Cole Credit Property Trust IV Inc., Cole Credit Property Trust V Inc., Cole Real Estate Income Strategy Inc., Cole Office & Industrial REIT Inc. and Cole Office & Industrial REIT Inc.

The sale will bring up to $200 million to VEREIT, comprised of $120 million cash paid at closing under the purchase agreement and up to $80 million in fees to be paid under a six-year services agreement based on CCO's future revenues. VEREIT will be required to provide operational real estate support to CCO for approximately one year under the services agreement.

The Cole business came under the umbrella of what was then American Realty Capital Properties with ARCP's $11.2-billion acquisition of Cole Real Estate Investments Inc. in 2013. A year later, RCS Capital announced a deal to acquire Cole Capital for $700 million; however, the sale was called off in the aftermath of an October 2014 accounting scandal that led to the resignations of several ARCP executives and, eventually, the net lease REIT's re-establishment under a new name (VEREIT) with a new CEO (Rufrano).

One aspect of re-establishing VEREIT, Rufrano told GlobeSt.com last May, was re-establishing Cole Capital, “which had been tarnished by some of the issues in 2014—not that Cole had anything to do with it, but when our financials were pulled, many of the broker-dealers suspended sales. In 2015, we were not selling a lot of equity; in 2016, we raised $487 million of equity, which is a remarkable turnaround that Cole achieved. It had no market share in '15 and 10% in '16, and we believe we're well on our way to re-establishing that brand.”